At the Request of James Company's Management

question 110

Multiple Choice

At the request of James Company's management,

• A) The shareholders did not suffer a loss.
• B) The shareholders were not primary beneficiaries of the audit engagement and they have no standing to sue.
• C) The shareholders failed to prove lack of appropriate professional care on the part of auditors.
• D) The shareholders did not rely properly on the financial statements.
• E)G. Company audited James's financial statements and was aware that James's management intended to deliver the financial statements to its 25 shareholders for the purpose of repurchasing their shares for $50 per share (the investors had originally purchased the shares for $5 per share). The audit was conducted in accordance with generally accepted auditing standards and the financial statements were prepared in accordance with generally accepted accounting principles. Later, the shareholders sued the auditors, claiming that if they had fully realized the significance of disclosures about the market value of the assets, they could have received $75 per share from James Company. The shareholders' lawsuit will probably fail because

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Definitions:

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they are accessible to all members of society and one person's consumption does not reduce availability to others.

Externalities

Costs or benefits arising from an economic activity that affect third parties who did not choose to incur that cost or benefit.

Economic Outcomes

The results or consequences of particular economic policies, decisions, or activities on the overall economy.

Pollution

Pollution denotes the introduction of harmful substances or products into the environment, leading to adverse effects on life and health.